Rosenthal v. Shapiro

• Decision Date: 17 April 1952
• Docket Number: No. 44,44
• Citation: 52 N.W.2d 859,333 Mich. 302
• Parties: ROSENTHAL et al. v. SHAPIRO et al.
• Court: Michigan Supreme Court

Page 859

52 N.W.2d 859

333 Mich. 302

ROSENTHAL et al. v. SHAPIRO et al.

No. 44.

Supreme Court of Michigan.

April 17, 1952.

Shapero & Shapero, Detroit, for appellants.

Sol Lumberg, Detroit, J. Harold Steffes, Berkley, for appellees.

Before the Entire Bench.

BUTZEL, Justice.

I concur in the opinion of Mr. Justice Boyles to the extent of his holding that plaintiffs are entitled to specific performance of their option to purchase as provided by the lease. I dissent from the holding that exercise of the option in the contract will not entitle them to the possession of the property and free them from any further obligations under the lease.

The effect of the opinion would be to obligate plaintiffs to make a down payment of $8,333.33 and the payment of $16,666.67 in installments of $166.67 per month plus interest on unpaid balances over a period of 100 months and also during the term of the lease and any extension thereof to pay $175 a month rent until the contract is paid in full. To the statement in Mr. Justice Boyles' opinion to the effect that under defendants' theory they would only be paying $166.67 a month under the contract instead of $175 under the lease, there should be stated that in addition to the down payment of $8,333.33, they would be obliged to pay for the first month the sum of $166.67 plus $83.33 interest or $250 (not $167.67) for that month and a slightly lesser amount each month thereafter. To retain possession, under defendants' theory, plaintiffs thus would be obliged to pay an additional $175 for rent each month. Plaintiffs claim they are entitled to the usual standard form of land contract which gives the vendee possession upon execution of the contract. Defendants in their stipulation of facts claim that if the option to purchase is deemed to have been validly exercised, then the plaintiffs are entitled to a contract for the purchase of title of the premises only upon the express terms of the option in the written lease which defendants claim will not give plaintiffs possession until the purchase price is fully paid at the end of the 100 months. The trial judge held that the parties in providing for the contract anticipated the giving of immediate possession to the vendees and that the lease would be ended. Plaintiffs already had possession under the lease.

Under the circumstances herein, the absurdity and injustice of defendants' contention is so apparent on its face that it never could have been in the minds of the parties. On execution of the contract, plaintiffs would became the equitable owners of the property, subject to defendants' lien for the balance due on the contract and interest. It would come as a great surprise and shock to the profession to learn that when a lessee enters into a contract to purchase and pays one-third down and 1 per cent per month of the balance, plus interest at the rate of 6 per cent per annum on the unpaid balance, he was not entitled to all rights of possession that the vendor had, but on the contrary would still remain obligated to pay the additional amount of $175 per month as lessee for 100 months to retain such possession.

The circuit judge in his opinion said that such a holding would place a strained and ridiculous interpretation on a simple and understandable lease and option. The judge stated, and we agree, that defendants have some authority for their position in Polczynski v. Nowicki, 227 Mich. 415, 198 N.W. 976, upon which case Mr. Justice Boyles partly relies. The court in the Polczynski case found that the lease was not terminated by the exercise of the option to purchase contained therein and the obligation to pay rent remained with the plaintiff. It also found that there was no right to possession under the option alone, in the absence of a provision therefor in the option, although plaintiff was allowed to retain possession under the terms of the lease.

The absence of the obligation to pay interest on deferred payments in the Polczynski case may have been a circumstance that the court considered as indicating that in the absence of some further consideration for possession of the premises, the parties did not intend that the lessees were entitled to it. The circumstances here indicate otherwise.

In further support of the contention that plaintiffs did not became entitled to possession under the option in the absence of an express provision to that effect, Mr. Justice Boyles also refers to Emmons v. State Land Office Board, 305 Mich. 406, 9 N.W.2d 657, wherein we cited Polczynski v. Nowicki, supra, in so far as it involved the statement as to the general rule that ordinarily the right of a contract purchaser to possession does not become operative until full payment of the purchase price. It, however, should be noted that the actual holding in the Emmons case was predicated on the rules and regulations of the State Land Office Board. We said therein (quoting syllabus):

'Bidder for property at so-called scavenger sale of land to which State had acquired absolute title through nonpayment of taxes, who had theretofore been renting such property from the State, was not entitled to recover rent which State land office board had required him to pay for occupancy after did had been made before it would deliver land contract for which he had applied, where under the board's rules the bidder was not entitled to possession until delivery of a deed or contract of purchase.'

We there held that the board's rules were reasonable and not capricious. There was no issue presented in the Emmons case as to the interpretation of a land contract with indefinite provisions as to possession. Neither did it involve the exercise of an option made as an integral part of a lease-option agreement. As its holding was so peculiar to its own facts, we do not feel it is inconsistent with the present determination and is in no way controlling here.

We find that all of plaintiffs' obligations under the lease terminated on the exercise of the option. We believe the correct rule of law to be followed in the instant case is stated in Cities Service Oil Company v. Viering, 404 Ill. 538, 89 N.E.2d 392, 402, 13 A.L.R.2d 1448, as follows:

'Defendant objects to the decree because it does not require from plaintiff payment of the rent specified in the lease until the date of the delivery of the deed and the payment of the $10,000. Where the relation of landlord and tenant exists under the terms of a written lease, containing an option to purchase which the lessee exercises, he is no longer in possession as a tenant, but his possession is that of a vendee. Bakaitis v. Fink, 340 Ill. 440, 172 N.E. 923; 51 C.J.S., Landlord and Tenant, § 82a. The lessor is not entitled to rent after the option to purchase is exercised unless there is in the lease an express stipulation therefor. 51 C.J.S., Landlord and Tenant, § 82a. The exercise of the option extinguishes the lease and terminates the relation of landlord and tenant. The lease and all its incidents, express and implied, are blotted out of existence, and the relation of vendor and vendee created. 33 Am.Jur., Landlord and Tenant, § 300. Although pending the making of a contract for the sale of real estate the prospective purchaser cannot in any sense, either at law or in equity, be considered as the owner of the land, the general proposition which does not admit of controversy is that when the making of the contract is complete, thereafter the land is regarded in equity as the property of the vendee subject to the rights of the vendor under the contract of purchase. Lombard v. Chicago Sinai Congregation, 64 Ill. 477. It follows that, when the plaintiff in this case exercised its option to purchase by notice in writing served on the defendant, a complete and absolute contract was created binding upon the plaintiff to buy and the defendant to sell, thereby vesting the equitable ovnership of the premises in the plaintiff. After that time the relation of landlord and tenant ceased to exist, and the rights of the parties must be determined upon the basis of a contract to sell and convey on one side and to purchase on the other.'

In so far as the Polczynski case holds otherwise, it is overruled.

The trial court properly found that plaintiffs should be entitled to possession under the terms of the land contract to be made in accordance with the option. The judge did state in his opinion that it is a matter of common knowledge that the standard form of land contracts used in that area, both presently and for years past, give the vendee the right of immediate possession, as opposed to the time when the contract is fully paid up, and when the parties anticipate the giving of a land contract they also anticipate giving possession to the vendee. Irrespective, however, of this particular holding we believe that when the additional fact that plaintiffs are already in possession is shown that the plaintiffs legally are entitled to immediate possession of the property upon exercising the option and thereafter will continue in possession as vendees and no longer as lessees.

Defendants cite a number of other Michigan cases to the effect that owners of property are entitled to possession until paid in full, in the absence of any provisions in a land contract giving purchasers the right of possession during payments. As Justice Boyles properly notes, however, these cases are all distinguishable as in none of them was the vendee in possession of the optioned premises at the time the option was exercised.

Our conclusion, therefore, is that plaintiffs are entitled to take possession under the terms of the contract without further obligation under the lease.

Decree of the trial court herewith affirmed, with costs to plaintiffs.

NORTH, C. J., and DETHMERS, BUSHNELL and REID, JJ., concurred with BUTZEL, J.

BOYLES, Justice.

Plaintiffs filed a bill of complaint in the circuit court for Oakland county in chancery to compel...